Blackstone Inc (BX) Presents at 2023 Bank of America Securities Financial Services Conference (Transcript)

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Blackstone Inc (NYSE:BX) 2023 Bank of America Securities Financial Services Conference February 16, 2023 12:30 PM ET

Company Participants

Steve Schwarzman - Chairman & Chief Executive Officer

Conference Call Participants

Craig Siegenthaler - BofA Securities, Research Division

Craig Siegenthaler

Now we tin get started. I'm Craig Siegenthaler from Bank of America. And it's my pleasance to present a man that astir apt hasn't needed an preamble successful 30 years, Steve Schwarzman.

As beautiful overmuch each of you already know, Steve is nan Co-Founder, Chairman and CEO of Blackstone and a fable wrong nan financial services community. After moving Lehman Brothers Investment Bank astatine property 36, Steve near and started Blackstone successful 1985. Steve wasn't conscionable instrumental successful building Blackstone into nan patient it is today, he was progressive successful each shape of nan firm's maturation and improvement from nan very beginning.

This includes nan firm's first-mover improvement from a buyout and advisory shop into a world replacement plus head pinch beardown businesses crossed each plus classes and each distribution channels: institutional, security and individual.

Outside of Blackstone, Steve has dedicated overmuch of his wealthiness and resources to giving back. In 2020, he signed nan Giving Pledge, committing to springiness nan mostly of his wealthiness to philanthropic causes. Some of this largest caller aid person been pinch nan acquisition vertical, including a $350 cardinal gift to MIT and a GBP 150 cardinal aid to nan University of Oxford. He besides founded nan Schwarzman Scholars Program successful 2013 astatine Tsinghua University successful Beijing, which is modeled to beryllium nan Chinese type of nan road’s scholars’ program.

Steve, connected behalf of each of america astatine Bank of America Merrill, convey you truthful overmuch for joining us.

Steve Schwarzman

Thanks, Craig, and acknowledgment for having a awesome conference. I publication each nan stuff, a batch of group here.

Craig Siegenthaler

Okay. So conscionable I'll supply a existent speedy intro connected Blackstone. AUM is astir $1 trillion. It's nan largest alts head successful nan world. It besides has nan largest individual investor business, which had started overmuch earlier and dedicated importantly much resources than its peers.

Last year, Blackstone generated astir $7 cardinal of free rate flow, and nan patient has grown astatine AUM by astir 14 times since its 2007 IPO. Despite this maturation and way record, nan banal is still offering a 5% dividend output coming versus astir 2% for nan mean S&P 500 name. And nan patient is highly divers pinch starring and scaled businesses crossed existent estate, backstage equity, in installments and hedge funds.

Question-and-Answer Session

Q - Craig Siegenthaler

Let's commencement pinch nan macroeconomic backdrop. Some thought we were ne'er going to spot precocious ostentation successful liking rates, again, but present we are. Steve, really do you deliberation liking rates and nan system will inclination complete nan adjacent year?

Steve Schwarzman

Well, I deliberation it's reliable to termination ostentation erstwhile you person a afloat employment economy. And you saw that successful nan past time aliases 2 pinch nan announcement of what nan ostentation numbers connected CPI were, I guess, astir 6%. So, you can't get to 2% from 6% conscionable by having a banal marketplace rally. It doesn't activity for illustration that.

And so, you're going to request higher liking rates. Usually, it takes each activity to 9 months to person higher liking rates play done an system to really get nan results that personification is looking for. It's not an instantaneous type of thing. So, I'm not a liquid securities person. I don't cognize precisely what's going to happen. But nan bias will beryllium to move liking rates up to a constituent wherever nan Fed thinks are really going to beryllium capable to slow things down.

And I conjecture nan marketplace is looking for 225 ground points increase. I would deliberation that would beryllium a minimum. The system is slowing. In nan first 4th net announcements, I deliberation we're present arsenic being somewhat disappointing. That should beryllium nary surprise. When you person liking rates up, you should turn slower. And ostentation stays up, your business will person a separator squeeze, which is what's happening.

So, I look for an interactive thing. You person to support seeing really overmuch ostentation is going down. It's clearance down. It was nine, now it's six. But it's comparatively easy to return thing down to four. With liking rates getting from 4 and two, that's beautiful painful. And I watched nan 1980s, possibly weren't erstwhile Volcker fundamentally really had to crush nan U.S. system to get ostentation down, location was a batch much ostentation than location is now. So, we're connected a bully path, but this doesn't get an instantaneous resolution.

Craig Siegenthaler

So, Steve, fixed higher rates, uncertainty, really does this effect nan lipid industry? And really does it effect faction specifically?

Steve Schwarzman

Well, it depends what portion of our business you look at. So, this is for illustration a aureate infinitesimal for credit. And we've won a merchandise called BCRED, which is 100% floating complaint elder secured loans. And successful today's value, nan investors getting a 10% return. So, if you look astatine 10% successful position of risk, it's really rather modest. I mean, if you if you deliberation you're buying elder secured debt, and that's a high-risk adventure, past you're not reasoning right.

So, it's adjacent to riskless really based connected nan humanities look backs. And you get 10%. We're really earning 12%, and we're keeping 2% backmost to fundamentally make judge we person capable indebtedness nonaccomplishment reserves and things for illustration that.

But if we were to miss for illustration this go, it's for illustration a 12%. So, ideate connected a longer-term basis, doing that pinch elder secured debt. So, this benignant of rhythm will really accelerate, I think, investors liking successful floating complaint credit. And that's really we've positioned our firm. We're nan leader successful nan world really making those types of loans successful nan replacement area.

In existent estate, it's going to person a very absorbing effect. There are tons of different types of existent estate, and they're not correlated successful position of really they behave. So, it's going to make agency moreover much difficult. It's not going to peculiarly thief malls, because consumers complete clip will walk less, and nan promenade business isn't truthful good. It won't peculiarly thief business travel. So, if you ain hotels, that's not arsenic good. But if you ain edifice hotels, they're booming. Everybody wants to for illustration unrecorded their life aft nan pandemic. So that doesn't get successful nan measurement of that.

Warehouse business is, frankly, fantastic. It's going up. Rents are still astir apt going up 12% erstwhile we -- it's sewage 3% vacancy. And specifically, to nan mobility you asked, really does this impact you? What happens is those higher rates discourage caller construction. So, what occurs is already that building of caller warehouses is down 40%. So that's mounting nan guidelines for a caller rhythm wherever nan existing stuff, wherever we're nan biggest backstage proprietor successful nan world, that's going to get different boost for rental increases complete time.

And nan aforesaid point is starting to hap successful rental housing, pinch still increasing astir 5% to 8%, depending connected what type you have. But nan cancellations of caller projects is very high. And so, erstwhile you person ostentation positive higher liking rates, group don't want to build caller things. If you ain aged things, that's a bully point for you, right? As agelong arsenic you're financed correctly, you're financed pinch longer-term indebtedness because it's a semipermanent asset, you'll do very good pinch that.

So, I deliberation I tin support going connected plus people by plus people because we do for illustration not everything, but astir things and show you really it will impact different things will lead to little prices complete clip for backstage equity deals. And truthful that's a somewhat cyclical business. You effort and waste your worldly erstwhile nan prices spell up and you effort and bargain a batch of worldly erstwhile nan prices are down. It's not a large encephalon business, right, finance. And truthful that's going to put unit connected pricing.

Usually, it takes 1 year, 1.5 years earlier that happens. People thin not to for illustration to waste assets astatine prices a batch little than it utilized to be, because they support remembering nan aged price. In 1.5 years, they put retired nan aged value and don't return a premium and deliberation that was a bully thing. That rhythm has only happened each clip I've been successful -- I've been doing this for complete 40 years. And truthful that will plaything around.

So, we look astatine these things and there's a clip to beryllium a buyer, a clip to beryllium a seller. And our business arsenic a whole, ideate this, pinch today's liking rates, our backstage equity companies past 4th grew their revenues 14%. They grew EBITDA 16%. So, I cognize this is against what's expected to beryllium happening. I mean, I publication media also. So, what's happening to america couldn't beryllium happening. It happened. So, it's ever absorbing erstwhile you spell into a cycle, but location are ever ways to make money.

Craig Siegenthaler

Steve, I person a inheritance mobility for you. So, successful 36, you're a Senior Executive astatine Lehman Brothers astatine nan clip Lehman's won nan champion finance banks trading platforms connected Wall Street. You decided to time off and you commencement a business that really hasn't been invented yet. What caused you to do that and return that risk?

Steve Schwarzman

Actually, it was an ethical decision. There was -- nan logic Lehman sewage sold successful 1984, I was nan personification that really sold it to American Express. What was -- it was because immoderate of nan group astatine nan business took a restricted subsidiary that person a circumstantial guidance arsenic to -- you tin only ain 30-, 60-, 90-day commercialized paper. They took it retired to 5 years, which was against nan charter and they sewage caught and burdened output curve and fundamentally crushed nan equity of nan firm.

So, nan patient haven't either person a awesome superior injection aliases waste itself earlier group recovered retired that nan patient had nary nett worth. Because borrowing repo, erstwhile group understand you person nary nett worth, thermal conscionable almost instantly collapsed. So, during that drama, location was, successful my view, astatine slightest nan request to alteration nan elder management.

And nan different partners of nan patient were frightened to do that, and they conscionable watched it each happen. And that wouldn't person been my measurement of handling that issue, and I decided I don't want to beryllium pinch those group anymore. So that's why I left.

It's benignant of an overseas thing. I mean, nan institution was for illustration 150 years old, and this should person been capable to beryllium solved immoderate different way. You could person brought successful superior and dealt pinch it. But so, I near because I didn't want to beryllium pinch nan people. And we started our business pinch nan erstwhile -- went into to business pinch nan execute Chairman and CEO of Lehman, who I had worked with.

We were benignant of for illustration a buddy movie. He knew everybody successful nan world, and I was nan young feline who did nan deals. And we benignant of almost didn't request to talk because he ain't for illustration doing deals. He ne'er did deals. And I didn't cognize each those group because I was successful my early 30s. So wherever would I meet each these people? So that was for illustration nan partnership.

And we took that connected nan roadworthy basically, started a caller business. I wanted to sanction it Schwarzman Petersen aliases Petersen Schwarzman. He didn't want his sanction connected thing because he started different business pinch Sizzle, pinch his sanction and personification else's connected it. So, he wanted successful individual name. So certainly, want a 3rd personification joined. We didn't person to make it for illustration a rule firm, right? You conscionable support adding these names.

And so, what we did is we took nan German of my past name, Schwarzman, and German is black. And his is Greek and his begetter earlier they changed nan sanction to Peterson, it was astatine Petropolis. So Petros intends rocker stone. And so, we conscionable took that.

So, I had nan wishful thinking that my sanction was connected nan door, but nan only group who knew it was, was nan 2 of us. And we started retired pinch a business scheme that said we're going to do M&A advisory work, because I tally nan M&A section astatine Lehman, truthful I cognize really to do that. It's a awesome business because you don't request immoderate capital. So, we've talked to people, and they springiness you millions of dollars.

Yes, I talked to group today. into that business. And astatine nan aforesaid time, our strategical scheme secondly was to spell into backstage equity, which is really conscionable starting arsenic an industry. I utilized to counsel nan comparatively fewer group who are successful that business. So, I was astatine nan aforesaid table. I saw what was going on. They were fundamentally my property three, 4 years older. Why couldn't we do this? I mean, it wasn't splitting nan atom, right? So, I wanted to do that.

And nan 3rd point we wanted to do was commencement different businesses that we, astatine that point, called Affiliates, which would beryllium owned 50-50 to spell into areas that we thought were going to roar successful finance. And we didn't cognize which they would be, but we cognize that finance is cyclical. Things autumn retired of fashion. Nobody wants to ain them. That's erstwhile you spell into them. And nan criteria we needed was catching that wave, coming up and going into business pinch personification who was a 10 connected a standard of 10, who really knew that business. And together, we turn it arsenic agelong arsenic we controlled it, because I want to power to extremity group from doing things successful a bad time.

That mightiness not beryllium bully for customers because sometimes, group point don't ever do nan correct thing. We cognize what nan correct point is. Sometimes, it's achy to do it, but you person to ever do nan correct thing. So that was our strategical plan.

And we had nary assets. We had ne'er done an investment, and now we're almost astatine $1 trillion. We raised $226 cardinal past year. I utilized to beryllium begging for fives and 10s. I still retrieve that. And now personification will springiness america a fewer 100 cardinal -- cardinal dollars for. A committedness is not abnormal for us. We had commitments arsenic large arsenic $20 billion. So, I've watched this manufacture turn from erstwhile we started. It was 3% alternatives successful nan organization world, it's 25% now.

And if you look astatine retail, which we're hiring willing successful and progressive with, it started 12 years ago. That's an $80 trillion bunch of money, and there's almost nary alternatives that are owned by this group. And our capacity is truthful good. That's why institutions went from almost thing into a quarter. And why should individuals not person nan aforesaid opportunities arsenic institutions?

I mean, a existent property business has complete 30 years, thing for illustration that, has averaged 700 ground points amended than nan banal market. Why should group astatine unit not person nan opportunity to person that benignant of investment? And we suffer almost nothing, truthful complete that play of time.

So, we've taken this small thought of nan business and not done acquisitions. We're not a roll-off for illustration personification negociate it, who've gotten big. This is each soul growth. It's going backmost to group and saying here's our performance. Here's our style of doing business and present are our values and benignant of travel connected this travel pinch us.

We're having a bully time. You should subordinate america and person a bully clip too. Why not? And they do. And so, we've become, by far, nan biggest successful nan world. We were for illustration 3 times nan marketplace cap. The adjacent 3 group you get, adjacent 3 competitors, we're bigger than those 3 together. And nan measurement to do this is by continuing innovative, coming up pinch caller products that don't person downsides, that conscionable person upsides. That's our philosophy. Don't suffer people's money. They don't for illustration you erstwhile you suffer their money.

Forget you've outperformed personification other who's mislaid moreover more. That comparative approach, I've ever felt, is ridiculous. People conscionable don't for illustration losing one. I don't for illustration losing money. I started pinch nary money. Why would I want to suffer what I have? Nobody does. So that's benignant of our baseline from we -- we'd spell to put things. And past we sewage to person a really bully upside. And past we spell forward. It's reliable to get america to spell forward, because location aren't that galore things astir for illustration that, but we ever find them.

And successful finance, you tin standard up. But we now person 60 different strategies. We started pinch 1 backstage equity fund. And now we do 60 different things. And astatine nan extremity of nan 3rd quarter, and besides successful nan 4th fourth nan past year, erstwhile markets were down, vanished nan twelvemonth down successful 18. The S&P, I deliberation NASDAQ was down for illustration 23, 24s, thing for illustration that. We were flat.

Can you imagine, for illustration not losing people's money? I cognize it. But merrill ne'er happened successful immoderate customer of a nonaccomplishment one. But successful fact, almost each customer mislaid money past year, unless you were doing benignant of business pinch us. So, our philosophy, it's for illustration a bully thing. And we person a full trained group of group who judge what I conscionable said. In different words, I'm not retired present arsenic an evangelist. This is really what we believe, believing successful what we do and really we're group up pinch our finance committees, and we support coming up pinch caller things that we find and group get utilized to buying things from america because they work.

And truthful arsenic agelong arsenic we support being an invention benignant of machine, if you will, we conscionable don't fto that worldly hap to present a caller merchandise astatine nan firm. You fundamentally person to travel earlier you spot caller group astatine nan patient and beryllium that this is simply a bully thing, it doesn't. We don't person for illustration bully fastener down location benignant of management, right? That's not what we do. Everything rolls up. And we activity cooperatively, but we ever bring connected captious things arsenic we bring nan full elder guidance of nan firm. Because each clip we do something, we're betting our reputation. And what you can't suffer is your reputation, and you benignant of fell dormant defender that.

So, it's been a really absorbing escapade complete nan past 37 years, and we're really accelerating now. We're not for illustration good going out. So, it's really fine. If you person a chance to activity astatine Blackstone, you should do that. It's really -- we person a bully clip and group laughter a lot. We get Best Place to Work awards because group are very positive, and we besides only prosecute bully people.

I learned astatine Lehman Brothers. My first time astatine work, I had my caller suit. I deliberation it's nan days erstwhile you had a little lawsuit because it useful paper, right? So, you put worldly successful it, proudly walked into nan office. Our building elevator opens, and personification gets retired who was working.

Stand up later. It was a partner. He looked astatine maine and said, "First day, isn't it?" I said, "Yes, this is my first day." And he said, "You're really going to emotion it here, Lehman Brothers." I said, "Why is that?" Knowing I was going to emotion it. He said, "Because if you activity astatine Lehman Brothers, cipher will ever stab you successful nan back. We'll conscionable locomotion correct up to you and extremity you successful nan front." That was my first interaction, my first time astatine activity into nan hands.

So, they really made bully connected that promise. It was a reliable place. So, erstwhile I commencement astatine Blackstone, I'd say, 1 point we're not going to do is simply a batch of these bad behaviors. And so, we only prosecute bully people. And erstwhile group travel to work, we enlistee them from different people. I'd for illustration to talk to group who make that alteration aft a fewer months, right?

So, what's nan biggest quality is everybody present is truthful bully and they want maine to beryllium successful. I said, "Of course, they do." They said, "But that's truthful different." I said, "Different from what?" He said, "Different from wherever I came from." I said, "Well, it shouldn't beryllium because group are precious. And if you've gone to nan effort to prosecute them, of course, you want them to beryllium successful. We want them to beryllium happy. You want them to beryllium productive. Why wouldn't we want that?" They said, "Well, I'm conscionable telling you, it's different from wherever I came from." So anyhow, we person a bully benignant of philosophy, and we person astonishing group astatine nan firm, which is really what creates nan success.

Craig Siegenthaler

Thanks for that. I ever statement it's amended to beryllium stabbed successful nan beforehand aliases nan back? The beforehand mightiness beryllium better.

Steve Schwarzman

Well, it's bad some ways.

Craig Siegenthaler

So, let's conscionable deed connected innovation. One point Blackstone has ever done very good is merchandise innovation. You've moved into areas faster than peers, caller and innovative products that didn't beryllium before. I mean, this is very important for your semipermanent maturation trajectory. So possibly you could talk astir your attack to invention and besides business building.

Steve Schwarzman

Well, 1 of nan things I observed very early successful my profession is that location are nary patents successful finance. So, thing you invent arsenic a caller product, if it's really good, your competitors will travel successful and imitate. And arsenic nan superior conscionable keeps pouring in, crush nan margins. So, astir products person constricted lives erstwhile they tin really execute well.

I was progressive successful 1 of nan first liking complaint swaps. We've sewage a 1% interest for doing that. I thought I died and thought to person it. We could make a luck conscionable fixed each this stuff.

Now they're doing liking complaint swaps, nan 1 ground constituent aliases something. So, it's turned into a nothing-burger business. And that's for illustration nan premier illustration of why invention and creation of caller products is successful a theory. It's not an option.

So, we cognize from nan first time we opened that we had to support coming up pinch caller things to return advantage of caller marketplace conditions and besides to protect nan business from nan anticipation that different group would beryllium doing nan aforesaid thing. And their superior could make a quality successful a antagonistic measurement arsenic it came successful and squeezed. So, we conscionable person ever done this.

Now each of our large verticals, whether it's existent property aliases backstage equity aliases in installments aliases hedge money business and immoderate of our different ones, each year, we -- I utilized to do this worldly myself erstwhile we were small. Then I realized, "Oh my goodness, I'm not that clever, and there's truthful overmuch to do." So, what we do pinch each of our business lines is we person a strategical readying point erstwhile a year. And they person to travel pinch up to 3 caller ideas for things that they could beryllium doing. And successful each one, for illustration what's nan return to nan investor? How large tin we make it? How costly is it for america to build it successful position of hiring group successful nan abstraction and each that benignant of stuff? And really accelerated tin we get to breakeven?

The thought that it takes years, I've seen a batch of these achromatic abstraction things that group talk about. Really, if you can't beryllium profitable successful a twelvemonth successful finance pinch a caller product, you should springiness it up. Because nan world keeps changing truthful overmuch that immoderate you started by nan clip they prosecute nan people, it whitethorn not beryllium that bully anymore. So, you've sewage to deed it correct away. So, whenever I spot these reports that personification says it's going to return maine 5 years to break even, and I'm going to -- that's usually an unsuccessful attack pinch group who don't understand really to turn nan business.

So, we look astatine really accelerated tin we get to profitability. And past we look astatine our ain business statement and say, "Do we person nan group to do this without hurting nan original business?" So moreover if it looks for illustration location are 3 bully ones, that whitethorn beryllium excessively overmuch to launch. So, we'll sound retired nan slightest good, possibly nan second, you only do one. We'll support that different ideas and spot if it still works.

So, you person to power your ain business, make judge you don't do immoderate harm to retreat it successful doing. But this is for illustration a measurement of life that are placed. And from really conscionable erstwhile we started 37 years ago, past everybody other successful my manufacture beautiful overmuch did nan 1 point that worked for them. And they decided aft we went nationalist successful 2007. And so, we were doing is I want to beryllium 1 of those because we had a $30 cardinal marketplace cap, and they had none. So, they started to effort and replicate that. It's very difficult to replicate that arsenic group are uncovering it.

Craig Siegenthaler

Steve, I wanted to talk astir your backstage wealthiness business. You started astatine possibly 11 [indiscernible], overmuch earlier than your competition. And this is simply a business that addresses galore different channels, IBD, RA, but besides nan wirehouses astatine Merrill. So, what really caused you to commencement this business early successful nan years and put a batch of resources down successful building a large distribution platform?

Steve Schwarzman

Yes, it was really personification else's thought to firm, and we've been trading backstage equity costs done unit distribution systems, but this is simply a very episodic business. And personification came to spot maine and said, "We should really do this connected a structural ground and build it out." And it was nan first clip successful my profession I person been knowing we mislaid money, because I said, "How overmuch does this cost?" I deliberation each time, it was location betwixt $10 cardinal and $12 cardinal a twelvemonth erstwhile we were for illustration a mini business. And pinch nan nonsubjective of conscionable being amended of what we were doing episodically and benignant of looked astatine nan unit channel. And I really benignant of hesitated to doing it because I don't for illustration losing money.

And astatine nan extremity of nan day, I said, "Okay, well, let's make that investment, build it retired nether 1 criteria," is that we person to person nan aforesaid value group successful that portion of nan business, which is fundamentally a work center, if you will, done nan unit channel, aforesaid value group arsenic we do for nan remainder of nan business. I said, "I don't want to tally benignant of different types of citizens astatine 1 firm." I mean, you've sewage to beryllium really terrific group doing that work.

And so, we conscionable started doing it, and we spent nan money. And activity years ago, interestingly, John Gray, who is successful Asia today, he's coming successful nan firm, perfectly astonishing terrific, person, he came retired pinch this thought of doing what's now called BREIT, which is bringing unit into nan precocious nett worthy channel, our organization value existent estate. And that became a very successful business pinch returns 3 times higher than investing successful nationalist REITs. And truthful that's been a large success.

Customers person done very well, benignant of averaged location betwixt 12% and 12.5% returns complete that six-year period, truthful 4 person astir existent income and 3% output from depreciation, truthful you're getting successful nan sevens, and benignant of nan mean 12 plus. So, this has been very good. And that scaled very well. And it's enabled america to do a 2nd large merchandise called nan BCRED, Blackstone Credit, and that 1 was nan 1 I mentioned. That's yielding much than 10.

And if nan Fed keeps going up, we'll support going up. And that's done really well. And so, we'll person a full family of products up of everybody else. We conscionable watch, "Oh, Blackstone did up. The banal marketplace goes down, precocious nett worth, group wanting much liquidity. But that's a short-term thing, and we're already seeing that redemptions are down substantially successful BREIT by this period compared to past month, truthful far.

And I deliberation nan early of introducing products location is great. We're doing a batch of worldly successful nan security area, sewage for illustration $150 billion, $160 cardinal now, but it's meant to beryllium accrued to $250 cardinal conscionable by contract, if you will. And we've sewage immoderate different things we're moving connected that will make america overmuch larger complete time.

So, to do this, you person to support coming up pinch caller products and caller reasons to beryllium relevant, but we're global, and group for illustration giving america money. I mean, $226 cardinal successful a year, it's unimaginable, isolated from we did it. And we were successful nan 200s nan twelvemonth before. And we look for illustration we recovered a area that's really, really different than anybody other successful nan world. I find a batch of nosy because I really don't person to do immoderate of it anymore, right? Because nan firm's sewage truthful galore astonishing group that I utilized to beryllium for illustration a door-to-door salesman for illustration galore of you.

And now I don't person to do that because different group waste nan products. So that's a motion astatine something, I'm not judge what. I guess, they telephone it your business has been institutionalized, but that's a bully thing. And institutions, 3 retired of 4 are still staying nan aforesaid aliases expanding their caller moneys going into alternatives, precocious nett worth. There's a immense opportunity for insurance. It's sewage $30 trillion of AUM, and we increase, we negociate money for an security institution and extremity up making, truthful far, for illustration 140 ground points much than they were doing.

So, if we tin do that and we tin waste nan measurement that business works, if they're earning more, they could either value their products much aggressively because they tin connection much to nan personification buying their products, aliases nan security companies’ profits will spell up arsenic a consequence of that. And so, we've go somewhat popular. No surprise.

And so, they person -- there's truthful galore trillions of dollars location that we could grip complete time. That's turning into a batch of nosy also. So, we person a terrific group of group pinch nan patient doing that. So, we're rather affirmative connected our business. And fortunate we recovered nan snitch astir galore years ago. And we don't wonderment enormously into different types of areas, because it's harder to beryllium successful successful liquid securities.

It's a really -- I did that pinch my first job. I couldn't fig retired really could I triumph pinch each these different smart group pinch constricted accusation you're allowed to have. And it's almost for illustration they want everybody to person nan aforesaid information. I ever for illustration an accusation advantage, that we tin do that pinch backstage securities.

Craig Siegenthaler

So, Steve, you person truthful galore businesses that are increasing correct now. When you talk to John, Michael Chang and nan elder leaders of nan firm, what 1 aliases 2 businesses are you nan astir excited astir from a maturation standpoint successful nan adjacent five-plus years?

Steve Schwarzman

I mentioned credit, truthful I won't do that, hit that drum again. But infrastructure is doing really good for us. Our infrastructure business past twelvemonth was up 19%. So, group should put their hands up. Who other was up 19%? Any hands? No hands. That's why I for illustration this, right? And that's why customers for illustration it.

And so, we spot important maturation complete clip pinch that business because that business is fundamentally U.S. business now, and that tin beryllium increasing successful Europe, wherever we've done 2 very ample deals; and successful Asia. So that's a existent maturation engine. We person -- betwixt that and credit, arsenic of today, those are benignant of 2 areas, past benignant of look for illustration they're doing peculiarly well.

Craig Siegenthaler

Steve, we tin get a mobility retired there, possibly from nan financial advisers, whether they should bargain nan Blackstone stock, ain a Blackstone funds, really do you respond to that?

Steve Schwarzman

Well, I respond, they're some good, right? And group evidently bargain these funds. We were astatine almost astatine $1 trillion of that. Our banal complete nan past 10 years has compounded astatine 25%. So, if you tin do amended than that, you really should. But 25% is not truthful bad. It's for illustration double nan S&P complete that time.

We've grown our net astir nan aforesaid benignant of -- it's 19% complete that clip period. And our aggregate goes up and down for illustration each stocks. So sometimes, it gets really risky and you make a lot. And past sometimes, nan aggregate goes down, it's not arsenic amusing. But nan business itself has performed very well.

We're nan largest institution successful nan state that isn't successful nan S&P. We're 74th aliases thing for illustration that connected marketplace cap, and we started pinch nothing, right? And we're going to some, for sure. And so, I deliberation that nan banal complete time, we salary a very precocious dividend. I deliberation you thought you said it was for illustration five? It's either 5 aliases four, 8 aliases thing for illustration that. So that's beautiful high. That's for illustration 3 times higher than nan mean S&P stock. So, you get for illustration a precocious existent income. You get this increasing company, which is overmuch much robust than -- it's 1 of nan fastest-growing stocks successful nan S&P [indiscernible] comparing it pinch that.

So, I deliberation nan banal is an absorbing investment. It's been ever has been. Funds are great, too. So, it depends really overmuch money you'll have, right? Where you tin put it? I do both. I ain a batch of banal and I put successful each of our funds. So, nan patient is my family office.

Craig Siegenthaler

So, Steve, you ain 20% of nan banal for that.

Steve Schwarzman


Craig Siegenthaler

But nan patient is $1 trillion roughly. It's a large firm, mightiness beryllium tougher to put up precocious maturation rates from forward, possibly you tin push backmost connected that. But really do you consciousness astir nan patient coming versus five, 10, 20 years agone pinch nan merchandise breadth you have, pinch nan distribution standard you have?

Steve Schwarzman

Yes, nan patient is beautiful amazing. Because what happens successful our business, we're really successful nan intelligence superior accumulation and guidance business, right? We're trying to spot what's happening successful nan world earlier different group do and enactment on, identifying trends, that's really you really make money. You don't make money conscionable sitting astatine your table increasing numbers. You person to cognize wherever nan world is going earlier it goes down.

And pinch nan standard that we're operating astatine now, it's truthful overmuch good because connected Mondays, location are astir apt 5 of us, six of us, 7 of america who beryllium successful a room. And each of our business groups travel in, and we talk astir everything they're doing, each woody they're moving on. And they'll show us, it's thing astir nan world wherein that manufacture is changing.

Imagine having real-time feeds connected nan world and almost each type of institution aliases existent property plus for our hedge money area, what's going connected nan credit. So, we tin spot changes cognize -- successful 1 state aliases 1 vertical, I'd telephone it. And arsenic soon arsenic we spot that, we tin fig retired whether that's going to dispersed each complete nan world aliases what's going to hap arsenic a consequence of that 1 portion of inflammation.

And that gives america -- for illustration successful existent estate, for example, we're virtually everywhere. We tin -- if we cognize what is happening successful a definite plus class, if warehouses are getting good, successful 1 place, that inclination astir apt will hap successful others. So, we could commencement buying erstwhile different group don't moreover cognize they should beryllium buying.

And so, standard useful for us. But to person it work, it has to beryllium harvested directly, which intends you request it each feeding into a cardinal location. We do it each week and whitethorn person to beryllium wholly open, truthful that everybody is telling everybody other pinch what's occurring.

So, this thought that standard doesn't work, I've only been asked that mobility since 1992. And group say, well, you can't beryllium right. We know. You conscionable person to beryllium mini to win. And I say, "No, you person to cognize much stuff. You could beryllium mini and triumph if you person astonishing domain expertise. You don't person overmuch money to invest, we do 2 deals, and they work. On nan different hand, you tin create this singular generator of intelligence superior and return that.

So, we started seeing that successful nan United States. It was for illustration 2012 that location shopping was starting and group didn't rather cognize what it was, and you could conscionable spot this thing. So, we needed location shopping, there's only a matter of clip earlier it's dispersed each complete nan world. They'll dispersed astatine different rates, but they all's get that because it's sewage immoderate advantages. So, we sold our malls. And we fundamentally concentrated successful nan warehouses that are utilized successful that distribution system.

And we did it each complete nan world. We're nan largest proprietor -- backstage proprietor successful nan world. And nan plus people conscionable for illustration exploded, and different group were buying agency buildings, which are fundamentally collapsed. We were 50% office. We sold each of our agency because we could spot thing that's going incorrect pinch that. And that's nan measurement we built an enduring institution pinch awesome performance. And nan advantage isn't for illustration 1 personification being a genius. I don't cognize that we person geniuses.

We person a strategy that manufactures data, that's what they telephone it now. With nan beginning, I wasn't nan smart kid successful class. So, I ever needed to spot stuff, right? Once I saw it, I knew what it meant. But if I couldn't spot it, I couldn't invent it. Some group could conscionable beryllium successful nan room benignant of speculated what's going on. I can't do that. I request these feeds.

So now we've created this singular system. And that's wherever we're going to support going. And we're going to support creating caller things. And we're each connected nan aforesaid squad doing it, conscionable fine. I mean, I've been doing this a agelong time. It's really much nosy now because it's easier.

Craig Siegenthaler

Right. Well, we will extremity there. We are retired of time. But Steve, connected behalf of Bovis astatine Bank of America and Merrill Lynch, convey you very much.

Steve Schwarzman

Thanks, Craig.

Editor: Naga

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